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Guidelines for Public Debt Management & E Finance

2017-06-04 12:50 [BANK] Source:Netword
Guide:The Guidelines are designed to assist policymakersin considering reforms to strengthen the quality of their public debt management and reduce theircoun

Guidelines for Public Debt Management -- Amended
Amended on December 9, 2003

Amendments to the Guidelines for Public Debt Management
November 25, 2003

Guidelines for Public Debt Management—Summary

Guidelines for Public Debt Management: Accompanying Document

Code of Good Practices on Transparency in Monetary and financial Policies

IMF Publications on public debt
  Guidelines for
Public Debt Management

Prepared by the Staffs of the International Monetary Fund
and the World Bank

March 21, 2001
Ordering Information

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The full text is also available in PDF format (288k pdf)


Debt Management Objectives and Coordination

Transparency and Accountability

Institutional Framework

Debt Management Strategy

Risk Management Framework

Development and Maintenance of an Efficient Market for Government Securities


Relevant Conditions for Developing an Efficient Government Securities Market  

I.  What is Public Debt Management and Why is it Important?

1. Sovereign debt management is the process of establishing and executing a strategy for managing the government's debt in order to raise the required amount of funding, achieve its risk and cost objectives, and to meet any other sovereign debt management goals the government may have set, such as developing and maintaining an efficient market for government securities.

2. In a broader macroeconomic context for public policy, governments should seek to ensure that both the level and rate of growth in their public debt is fundamentally sustainable, and can be serviced under a wide range of circumstances while meeting cost and risk objectives. Sovereign debt managers share fiscal and monetary policy advisors' concerns that public sector indebtedness remains on a sustainable path and that a credible strategy is in place to reduce excessive levels of debt. Debt managers should ensure that the fiscal authorities are aware of the impact of government financing requirements and debt levels on borrowing costs. Examples of indicators that address the issue of debt sustainability include the public sector debt service ratio, and ratios of public debt to GDP and to tax revenue.

3. Poorly structured debt in terms of maturity, currency, or interest rate composition and large and unfunded contingent liabilities have been important factors in inducing or propagating economic crises in many countries throughout history. For example, irrespective of the exchange rate regime, or whether domestic or foreign currency debt is involved, crises have often arisen because of an excessive focus by governments on possible cost savings associated with large volumes of short-term or floating rate debt. This has left government budgets seriously exposed to changing Financial market conditions, including changes in the country's creditworthiness, when this debt has to be rolled over. Foreign currency debt also poses particular risks, and excessive reliance on foreign currency debt can lead to exchange rate and/or monetary pressures if investors become reluctant to refinance the government's foreign-currency debt. By reducing the risk that the government's own portfolio management will become a source of instability for the private sector, prudent government debt management, along with sound policies for managing contingent liabilities, can make countries less susceptible to contagion and Financial risk.

4. A government's debt portfolio is usually the largest Financial portfolio in the country. It often contains complex and risky Financial structures, and can generate substantial risk to the government's balance sheet and to the country's Financial stability. As noted by the financial Stability Forum's Working Group on Capital Flows, "recent experience has highlighted the need for governments to limit the build-up of liquidity exposures and other risks that make their economies especially vulnerable to external shocks." Therefore, sound risk management by the public sector is also essential for risk management by other sectors of the economy "because individual entities within the private sector typically are faced with enormous problems when inadequate sovereign risk management generates vulnerability to a liquidity crisis." Sound debt structures help governments reduce their exposure to interest rate, currency and other risks. Many governments seek to support these structures by establishing, where feasible, portfolio benchmarks related to the desired currency composition, duration, and maturity structure of the debt to guide the future composition of the portfolio.


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